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Dec. 2006, pdf, 2.6 MB

Objectives and scope of the study

The tourism industry as defined for the quantitative survey of enterprises covers the following business activities: Hotels and restaurants (NACE Rev. 1.1 H 55.1 – 55.4), activities of travel agencies and tour operators, tourist assistance activities (I 63.3) as well as recreational, cultural and sporting activities (O 92.33, 92.52 and 92.53).

For the qualitative analysis of this study the sector definition has been extended to include those parts of the transport sector relevant for tourism, especially the aviation industry.

e-Business activity

Underpinning the results from previous surveys, tourism is in the vanguard of ICT adoption and e-business in the area of e-marketing and online sales. In this area of customer-facing e-business activities “e-tourism has taken off”. Yet, in a ranking of the 10 sectors studied in 2006, the tourism industry only scores in the middle field regarding the overall use of ICT and e-business. Especially regarding the deployment of ICT infrastructure and the adoption of e-integrated business processes, tourism companies are still lagging behind their counterparts in other industries.

This finding is supported by several indicators: For example, the overall internet connectivity is still somewhat below the average of the 10 sectors surveyed, also the level of usage of ERP (enterprise resource planning) systems is low and e-procurement is significantly less developed than in other sectors.

Overall, customer expectations and market competition are the main drivers of e-business in the tourism sector, while the small size of most companies and the considerable costs associated with acquiring technologies constitute the main barriers for a stronger uptake of e-business.

Considering ICT adoption and size of companies, the most outstanding result is that small tourism companies are more active users of e-business compared to their counter­parts from other industries. The gap between big and small companies in using ICT and e-business applications may be relatively smaller than in other industries.

Furthermore, results broken down by different sub-sectors of tourism show that travel agencies and tour operators seem to be the strongest adopters of ICT and e-business, followed by the accommodation sub-sector and – with much lower adoption rates – by the gastronomy sub-sector.

Current e-business trends and implications

Dis-intermediation and re-intermediation

e-Business processes have led to conflicting, parallel trends which have a profound impact on the role of intermediaries in the tourism market:

  • Dis-intermediation: ICT enables tourism service providers to interact directly with consumers, which puts enormous pressure on traditional intermediaries (i.e. travel agencies and tour operators). The extent to which intermediaries are bypassed differs considerably between various sub-sectors: While, for example, the accommodation sector is only partially affected by dis-intermediation, the aviation industry tends to be much more affected by dis-intermediation – mainly by airlines selling tickets directly to consumers over the internet.
  • Re-intermediation: Yet, ICT solutions may also provide new opportunities for traditional players and newly emerging online intermediaries. Many new entrants in the market, which operate exclusively online, successfully provide intermediary services, while some brick-and-mortar intermediaries have managed to secure their position in the market by offering value-added online services.
  • Ongoing market consolidation: There is an ongoing trend of market consol­idation among intermediaries, driven by organic growth, mergers, acquisitions and strategic alliances. This, despite an increase in competitiveness on company level, might lead to reduced competition in the tourism market in the long run.

Dynamic packaging

Traditional packages offered by tour operators and travel agencies tend to be effective in bundling separate products, but only with limited flexibility. However, the increasing trend towards individualisation of tourism demand requires more flexible, dynamic packages. Despite the fact that technological and organisational barriers for truly dynamic packaging are considerable, a number of players have managed to develop feasible solutions for dynamic packaging.

ICT-related developments in the aviation industry

The aviation industry is one of the sub-sectors of tourism most affected by the development of ICT and the internet. In this context, no-frills airlines are the most striking feature of this market as they rely heavily on e-business solutions.

  • e-Ticketing: The avoidance of classical paper-based tickets is one of the core elements of the low-cost business model. Yet, e-ticketing is not limited to no-frills airlines. The adoption of e-ticketing is also increasingly pursued by network carriers. The International Air Transport Association – IATA – intends to achieve a 100% penetration of e-ticketing among its members worldwide by the end of 2007.
  • Customer self-service: Another measure for cost reduction and the acceleration of passenger flows at airports is to introduce customer self-service check-in solutions. This may be done on the spot by self-service kiosks or in the form of web based check-ins, which may even allow users to check-in from home or their office.
  • Bar-coded boarding passes offer a natural link with e-ticketing and self-service check-in. Most recently, it is not only possible to print boarding passes at the passenger’s home, but also to place bar codes on the passenger’s cell phone which makes a paper document completely obsolete.
  • RFID for luggage handling might replace classical baggage tags in the near future. It might simplify airline baggage management considerably, improve customer service in terms of reductions in mishandled baggage and provide new security requirements.

Business impact

The ongoing market concentration might lead to the formation of “oligopolies”, where only a few companies dominate the market, and which will eventually lead to reduced competition. Yet, at the same time, competition pressure is expected to rise, as the anticipated growth in turnover in the next few years will be limited, and as ever more price-conscious consumers will put further pressure on tourism enterprises to reduce costs. The following business trends, some of which are contradictory, are expected to shape the market in the near future:

  • Low barriers to new market entrants, which pose a threat for traditional players;
  • Ongoing ICT-based substitution of services provided by traditional players;
  • Online distribution channels strengthening the role of suppliers;
  • Driven by ICT, consumers are becoming more directly involved in the production, compilation or innovation of products and services;
  • Growing competition in the online market.

Policy implications

ICT have an influence on the further consolidation of intermediaries, and in particular the market concentration of online intermediaries. This could, in the long term, lead to the formation of strong oligopolies with negative effects on competition. In order to counteract such ICT induced market failure, it is recommended that policy should closely monitor the ongoing market concentration of tourism intermediaries and intervene, if necessary. Regarding policies to promote e-business and ICT adoption the following measures would seem most promising:

  • Initiatives to promote networking and cooperation: As with previous e-Business W@tch studies, such policies are still highly encouraged;
  • Encouraging the adoption of e-business in micro and small companies: Due to the dominance of micro and small enterprises in the sector, measures promoting these types of companies are necessary;
  • Promoting ICT infrastructure and e-integrated business processes;
  • Encouraging innovation and research and development in e-tourism.

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